UPDATE 2-Indonesia's likely next leader plans to reconcile Newmont dispute

Wed Jul 16, 2014 7:44am EDT

* Jokowi govt to have talks with Newmont on contract dispute-adviser

* Outgoing government had threatened to end Newmont's contract

* Newmont has filed for int'l arbitration, declared force majeure (Recasts with comments from Jokowi's adviser)

By Wilda Asmarini and Fergus Jensen

JAKARTA, July 16 (Reuters) - Indonesia's likely next president signaled a conciliatory approach to the country's contract dispute with Newmont Mining Corp a day after the outgoing government threatened to end the U.S. miner's contract over a legal challenge.

A government of Joko "Jokowi" Widodo, the presidential front-runner, will seek negotiations with Newmont, a senior party official said on Wednesday.

The developments represent the latest twist in a six-month long contract dispute between the Indonesian government on the one hand and Newmont and fellow U.S. miner Freeport-McMoRan Inc on the other that has led to a halt in copper shipments from Southeast Asia's biggest economy.

Earlier this month Newmont filed for international arbitration over an escalating export tax the government imposed in January that the company says is in breach of their mining contract.

Newmont also declared force majeure on shipments last month and said it was forced to halt production at its Batu Hijau copper mine in eastern Indonesia because it had still not received an export permit from the government and that its copper concentrate storage facilities had reached full capacity in early June.

President Susilo Bambang Yudhoyono's administration threatened on Tuesday to terminate Newmont's contract if it did not withdraw the legal challenge.

Advisers to Jokowi, however, said they would use a different strategy in dealing with Newmont, if the Jakarta governor is declared the winner of last week's disputed elections.

"We think later we will establish healthy communications, and sit down together," Darmawan Prasodjo, senior energy advisor to the Jokowi team, told Reuters in response to questions on how Jokowi would handle the dispute.

"The spirit of the next government if Jokowi becomes president will be different to the spirit of the current government ... the government must be sensitive," he added.

GRASS-ROOTS APPROACH

Jokowi, who is leading in reputable quick count polls, would be appointed president in October pending the outcome of an election earlier this month.

Jokowi is known for his grass-roots approach to governance and would settle the Newmont dispute together with stakeholders, Prasodjo said.

Newmont's Indonesian spokesman was not available for comment on the matter.

Sacha Winzenreid, mining analyst at PricewaterhouseCoopers, said neither party had a particularly clear political platform in relation to mining but that the dispute was expected to be resolved, regardless of who was in power.

"The last thing the government wants is to go to international arbitration and lose. They have to hold their ground now, at least publicly," the analyst said.

Indonesia has faced harsh criticism from mining stakeholders for the mining export rules that effectively halted $500 million of monthly mineral ore and concentrate shipments.

Newmont and Freeport, which account for 97 percent of Indonesia's copper output, have both argued the rules, intended to force miners to build smelters, conflict with their contracts.

Global copper prices, currently not far off five-month highs, have been underpinned by the disruption to supplies from Indonesia, and traded near $7,130 per tonne on Wednesday. (Editing by Richard Pullin and Muralikumar Anantharaman)

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